Russia 110419 Basic Political Developments

Evraz Eurobond guidance around 6.75 pct –sources

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Evraz Eurobond guidance around 6.75 pct –sources
3:58am EDT

MOSCOW, April 19 (Reuters) - Russian steelmaker Evraz HK1Q.L is guiding investors towards a yield of around 6.75 percent on its 7-year Eurobond, two banking sources told Reuters on Tuesday.

Evraz, part-owned by Russian tycoon Roman Abramovich, is looking to issue up to $1 billion, and on Monday was guiding towards 6.7-7.0 percent, sources had said. [ID:nLDE73H0KQ]

(Reporting by Oksana Kobzeva; Writing by Toni Vorobyova; Editing by Alfred Kueppers)

Alfa Bank Eurobond guidance at 7.875-8 pct –source
3:50am EDT

MOSCOW, April 19 (Reuters) - Russia's largest lender, Alfa Bank has set the price guidance on its 10-year Eurobond at 7.875-8.000 percent, a banking source told Reuters on Tuesday.

Banking sources on Monday had pointed to unofficial guidance of 8 percent on the upcoming issue, expected to be worth between $500 million and $1 billion. [ID:nLDE73A1NV] (Reporting by Oksana Kobzeva; Writing by Toni Vorobyova)
Nomos Bank raises $718m in IPO

      RBC, 19.04.2011, Moscow 10:47:00.Nomos Bank has generated $718m in IPO proceeds, the bank said in a statement late Monday.

      It sold shares at a price of $35 a share, which corresponds to $17.50 per Global Depositary Receipt (GDR). The indicative price range was set at $32-$37 a share. The offering was oversubscribed. The bank's free float after the offering will amount to 22%. If a 15% over-allotment option is fully exercised, the free float will be equal to 25%.

      Based on the share price, the bank's capitalization will reach $3.2bn after the upcoming private offering. The bank's management bought shares worth $6m during the IPO. Additionally, the bank is set to receive about RUB 5.5bn (approx. USD 195m) from a private offering of newly-issued shares to be made after the IPO.

      Trading in Nomos Bank's GDRs on the London Stock Exchange is set to start today. The GDRs will be listed on April 27.

Nomos Bank raises $718 mln in first Russian bank London IPO
11:14 19/04/2011

MOSCOW, April 19 (RIA Novosti) - Nomos Bank, one of Russia's top 30 banks, has placed 22% of its stock in an initial public offering (IPO) to raise $718 million and become the first Russian private bank listed in London, the bank said in a statement late on Monday.

The share price was set at $35 and $17.50 per Global Depository Receipt, in line with the price guidance of $32-37 per share and $16-18.50 per GDR.

"This was a very advantageous deal. The stock was sold among premium investors. The bid book was subscribed already on the second day of the roadshow. The stock was oversubscribed by several times," an investment banker familiar with the IPO told RIA Novosti.

Another investment banker said the book was three times oversubscribed.

Deutsche Bank, Credit Suisse, VTB Capital and Citi were the lead managers.

The offering comprised the bank's existing shares largely held by minority shareholder Roman Korbachka and a new share issue worth 5.5 billion rubles. Korbachka granted the lead managers an overallotment option of 15% of the base offering.

The bank's stock will be included in the quotation list of the London Stock Exchange from April 27.

All about price - Nomos IPO goes through at upper end of range
April 19, 2011

Nomos Bank announced a price of $35 per share ($17.5 per GDR) as it closed the book on its IPO on the London and Moscow markets on Monday. The success of the listing, which reported oversubscription and went through towards the higher end of its indicative range, confirms that investors are ready to buy reasonably priced offers from Russian companies in sectors less common on the public markets.

Nomos raised $718m from the initial listing, with an over-allotment offer of a further RUB5.5bn ($194m) set to be sold via closed subscription immediately following the IPO, the bank said. Implying a market capitalization of $3.2bn, the offer price was towards the upper-end of the initial range of $32-37 per share, or $16-$18.5 per GDR. The bank tightened the range just ahead of the sale to $17.25-$18.5 per GDR.

The IPO sees the April rush to market by Russian issuers end on a much better footing than a similar bid in February - when three of four issues were pulled. This month, three of the four pushed through, although only Nomos managed to pull away from the bottom of its range. Together with agricultural producer Rusagro and property group Etalon this month, and pump-maker HMS in February, Russian IPOs have now brought in $1.98bn.

Meanwhile, with mobile phone retailer Euroset joining the ranks of pulled issues, the total volume of failed listings so far in 2011 is $3.5-$4bn, according to their indicative ranges.

One point that the Nomos sale appears to argue with is that investors are not ready to simply cash out shareholders - which was amongst the reasons offered by analysts for the failure of Euroset and NordGold to push through issues. However, only the over-allotment will be invested back into the bank, with the rest being pocketed by Slovak shareholder Roman Korbacka.

The Nomos IPO was notable in that it was the first offer so far this year at a reasonable price. Certainly it's the only issue which did not have analysts fretting that it was over-priced. Euroset in particular was accused of trying to leave nothing on the table for potential investors with its range. Investors have become much firmer over pricing since the crisis, and - despite consistent attempts by Russian issuers to return to their old ways - appear united in that stance.

Troika Dialog writes: The sale implies a post-money 2011E P/BV of 1.4, which looks about fair relative to other mid-cap names such as Vozrozhdenie Bank and Bank of St Petersburg, which trade at a 2011E P/BV of 1.3-1.5.

NOMOS Bank has advantages and drawbacks relative to these names. It has a limited capital markets track record but will be the only mid-cap name with a London-listed GDR, and it also looks to have a decent sized free float. It is currently a more profitable bank than either peer (its 2010 pro forma ROAE was 21.1%) but has a loan book that is heavily tilted toward corporate business (over 89% of the book, even after the consolidation of the more retail-focused Khanty-Mansiisk Bank), and with almost half of all loans to construction/real estate and financial companies. It has posted phenomenally high recent growth (even excluding Khanty-Mansiisk Bank) and has been actively selling and writing off loans, helping to keep a very low NPL ratio.

Alfa Bank meanwhile is expecting Nomos to continue the poor post-market performance of Russian IPOs: Trading of GDRs begins today in London. Free float will be 22-25%, depending on how much of the over-allotment option is used, which equates to $684-777m based on the IPO price.

We believe this IPO pricing was full, notwithstanding yesterday’s market downturn, and expect trading to open substantially below the IPO price. On the positive side, we believe the completion of the transaction at such a price is positive for sentiment relating to Russian banks’ shares.

April 19, 2011 11:19

S&P improves Renaissance Capital rating to 'B' from 'B-' with 'Stable' outlook

LONDON. April 19 (Interfax) - International rating agency Standard & Poor's has improved its long-term rating on the bank Renaissance Capital to 'B' from 'B-', with an outlook of 'Stable', S&P said in a release.


Sberbank's shares might be sold on the open market during privatisation

VTB Capital

April 19, 2011

News: Yesterday, Sberbank CEO German Gref made a number of statements.

During the privatization process, Sberbank's shares might be offered on the open market, although the size of the offering is to be defined right before the placement (which is pencilled in for 3Q-4Q11).

- Two independent directors will join Sberbank's Supervisory Board as Elvira Nabiullina and Arkady Dvorkovich will not be re-elected to the Board (in line with the initiative by President Dmitry Medvedev to improve corporate governance).

- The bank's strategic goal is to compete with RBI and Unicredit Group on the CEE markets, with Sberbank eyeing international expansion. It considers Poland and Turkey as the most promising markets, and also reiterated its long-term interest in India, China and Vietnam.

Our View: Given the size of the future privatisation, which is too small for a strategic investor, we consider that the shares will be sold on the open market. The DR programme (due at the end of June) would help to offset part of the price overhang following a substantial offering. However, in our view, despite the high investor demand, Sberbank's stock price is likely to be capped over the next couple of quarters by the overhang risk.

While the statements about international expansion are just a repeat of the known strategy, it is the M&A part of Sberbank's story that has recently been dominating the wires. Although the potential VBI deal seems to be the most advanced, we see some near-term obstacles for Sberbank as it would have to learn how to work in the more competitive CEE region, which could distract it from its Russian homework.

Dmitry Dmitriev

April 19, 2011, 2:54 PM HKT

Russian Stocks Not Fit for Hong Kong?

Despite multiple Russian companies signalling their intent to list in Hong Kong, one technical issue still exists – the Hong Kong stock exchange is yet to include Russia in its list of accepted jurisdictions (Rusal is incorporated in Jersey), writes Dow Jones Investment Banker. Russian companies which aren’t well-known to local investors or have weak links to Asia could also find it difficult to gain a place in the region’s portfolios.

By Philippe Espinasse

Russian President Dmitry Medvedev and his entourage were all smiles when they visited the Stock Exchange of Hong Kong’s trading hall Sunday. But listing Russian companies in Hong Kong still faces technical and regulatory hurdles, as well as in many cases an uphill struggle to convince investors in Asia that Russian stocks have a place in their portfolios.

Before Medvedev’s visit, Russian investment bank VTB Capital announced through CEO Yuri Soloviev the opening of an office in Hong Kong, where it plans to hire some 30 people to help Russian companies conduct IPOs and raise “billions of dollars” in Asia.

Candidates for listing in Hong Kong include power company EuroSibEnergo – controlled by Oleg Deripaska and which pulled an IPO there earlier this year – with at least four more interested in a listing here, according to Medvedev aide Arkady Dvorkovich.

Russian companies are following the same logic as global commodities firms such as Glencore. Seeking a listing in Hong Kong is good politics against the background of China’s seemingly insatiable appetite for natural resources. A deterioration in the primary equity market in London, the international listing venue of choice for Russian issuers, has also prompted them to look East.

At $2.2 billion, Deripaska’s aluminum producer United Co. Rusal was the third largest IPO in Hong Kong 2010, and the very first one by a Russian business there. It attracted high-profile cornerstone investors for about 40% of the deal, including Malaysian tycoon Robert Kuok, Russia’s Vneshekonombank, Nathaniel Rothschild and John Paulson’s hedge fund.

It hasn’t all been plain sailing, though. Shareholders had to wait for the best part of a year for the stock to finally trade above the offer price, and the regulator in Hong Kong, the Securities and Futures Commission, largely prevented retail investors from participating by imposing a sizeable initial board lot. This has since been adjusted downwards several times, boosting trading volumes, and also enabling a few sizeable block trades.

But there are still technical issues with listing Russian stocks in Hong Kong. Rusal is incorporated in Jersey and, despite statements of intent, including in HKEx’s 2010-2012 strategic plan, as of April 14, Russia didn’t appear on the list of jurisdictions which the listing committee has formally ruled as acceptable as an issuer’s place of incorporation.

Furthermore, quite a few of the mooted IPO candidates are largely unknown quantities in Asia, and some are unable to demonstrate much more than a tenuous link with the region. This could be an issue in Hong Kong, where 30% to 50% of IPOs routinely get allocated to retail investors.

Many institutions with a base in Asia run regional portfolios too, and will find it hard to justify buying these stocks–unlike their counterparts in Europe.

Meanwhile, those Russian companies seeking secondary listings in the hope of tapping Asian wealth would be well advised to look at the diminutive trading volumes in Hong Kong for such giants as the U.K.’s Prudential PLC and Brazil’s Vale SA. This raises the question of what such a move would bring them, aside from additional listing and sponsor fees, legal issues, and disclosure costs.

At the exchange, Mr. Medvedev was presented with a floor trader vest sporting the number 6683 (an auspicious one in Chinese) as a souvenir, but in Hong Kong, the R in BRICS could well stand for “rare” as well as “Russia.”

(Philippe Espinasse worked as an investment banker in the U.S., Europe and Asia for more than 19 years and now writes and works as an independent consultant in Hong Kong. Visit his website at Readers should be aware that Philippe may own securities related to companies he writes about, may act as a consultant to companies he mentions and may know individuals cited in his articles. To comment on this column, please email

Activity in the Oil and Gas sector (including regulatory)

Russian Oils - If $120/bbl balances the budget, don't expect material tax cuts for oil

April 19, 2011

Russian Minister of Finance Alexei Kudrin yesterday told reporters that Russia's 2012 budget would only be balanced if oil averages $120/bbl for the full year. Expenditures are being drive by two key budget priorities of rearming the military and social expenditures, which help drive the budget up some 5% this year and another 8% in 2012. Military expenditures are expected to rise sharply again in 2013. Meanwhile, a source in MinFin indicated to RBK Daily that the proposed 60/66 tax restructuring - which would reallocate the tax burden within the oil sector from upstream to downstream by lowering export duties on oil in exchange for higher and unitized duties on refined products - may have to be delayed past the planned 2013 start date due to complications from the customs union with Belorussia and Kazakhstan.

Our view: The take-away is simple: The government cannot afford to give the oil sector a significant tax break in the foreseeable future. According to our rough calculations, the oil sector accounted for c.50% of budget revenues in 2010, up from c.40% in 2009 (including extraction taxes, export duties, and excise taxes, but not profit tax), while the gas sector added another c.6-7% each year. Although there is room for the gas sector to pick up some of the burden (and gas taxes will likely go up as domestic tariffs rise), and room to reallocate the tax burden from the upstream to the downstream, the oil sector's contribution to the budget is just too large to give any meaningful net breaks to the sector without blowing a rather large hole in the government's finances.

Ron Smith

TNK-BP worth $54.1 bn: report

(AFP) – 19 hours ago

MOSCOW — TNK-BP, the Russian joint venture of the British energy giant that is at the heart of a heated merger dispute, is worth $54.1 billion, Moscow's Finans magazine reported on Monday.

The valuation appeared in the weekly's annual ranking of the country's biggest companies, with the list headed by natural gas giant Gazprom on $205.4 billion and state-held oil firm Rosneft -- BP's erstwhile partner, on $99.4 billion.

TNK-BP came in sixth, also trailing the RZhD Russian Railways company, state bank Sberbank and private oil firm Lukoil.

The Russian billionaires who own half of TNK-BP -- collectively known as AAR and led by the banker Mikhail Fridman -- have used the courts to halt BP's $16 billion share swap and Arctic exploration agreement with Rosneft.

Rosneft last week agreed to extend until May 16 the deadline by which the deal could be agreed, with one of the discussed options involving a buyout by BP of its Russian partners.

Western and Russian press reports said that BP was willing to offer AAR $27 billion for the group's stake in TNK-BP, which is one of the world's top 10 private oil producers.

But the billionaires refused, valuing the company at more than $70 billion.

The oil firm is not traded on Western exchanges and its true value is under dispute although the Finans valuation is closer to that suggested by BP.

Akhmedov Seeks $1.8 Billion for 49% of Northgas, Vedomosti Says
By Torrey Clark - Apr 19, 2011 6:55 AM GMT+0200

Farkhad Akhmedov raised the price he wants for his 49 percent in ZAO Northgas to $1.8 billion after getting a higher valuation from bankers and an audit of the Russian gas producer’s reserves, Vedomosti said today, citing a letter from the businessman to the potential buyer, OAO Inter RAO UES.

Inter RAO, a state-run power utility, had agreed to buy the stake for about $1.5 billion under a non-binding agreement, Vedomosti said, citing the businessman. Akhmedov may use the extra $300 million to buy Inter RAO stock, the newspaper said.

OAO Gazprom, which owns the majority stake in Northgas, didn’t exercise its right of first refusal to Akhmedov’s stake by an April 12 deadline, the newspaper said, citing two unidentified people with knowledge of the transaction.

To contact the editor responsible for this story: Torrey Clark at
Novatek confirms interest in Yamal license auction

April 19, 2011

Following up on yesterday's story that Gazprom sources indicated that the company would not participate in this Fridays' auction of 4 licenses on the Yamal peninsula, Novatek yesterday afternoon confirmed to Vedomosti that it most definitely would bid for those resources. Novatek, of course, would be able to plug these fields into the infrastructure it is planning to build around its Yamal LNG venture. Total estimated reserves of the two better-explored of the fields, named Geophysical and Salmanovsky, are some 980bcm of gas and 975m bbl of liquids (C1+C2), with a starting price of some $220m, or around $0.03/boe of reserves. The remaining two have an estimated 1,800bcm of gas and 3.8bn bbl of liquids, but are higher-risk as they have apparently not been appraised to C1 + C2 standards. Accordingly, their starting price is only $25m, or $0.01/boe.

This news is not surprising, as we already expected Novatek to bid in the auction. Winning - as seems likely given the company's ambitious plans in the region and given the absence of Gazprom - could be significant for Novatek, in our view. The add would be significant relative to the company's proved reserves of 1,150 bcm (although 2P is a rather larger 1,620 bcm). As important, it would extend the company's winning streak of the last couple of years, underlining that the stock's value is likely well in excess of what current operations can justify alone. However, we think the exact value added for Novatek's shareholders by these reserves - should the company indeed win the tender - is more difficult to ascertain at this point, although positive, as production from any of the above four fields is likely to be at least 8-10 years off, well over the horizon for many equity investors.

Ron Smith


04/19 11:42   Gazprom looks to extract 200 bcm on Russian shelf by 2030 – Yazev


Gazprom Pushes Agm Back From June 24 To 30, Will Have Egm June 30 - Gazprom

Annual and extraordinary General Shareholders Meetings of Gazprom to be convened on June 30
19.04.2011 11:05

The Board of Directors resolved to reschedule the annual General Shareholders Meeting of Gazprom from June 24 to June 30, 2011.

The Gazprom Board of Directors also resolved to convene the extraordinary General Shareholders Meeting. The Meeting will begin at 4:00pm (local time) on June 30, 2011 at the Company's headquarters in Moscow. Registration of the Meeting participants will be held on June 28 (from 10:00am to 5:00pm) and on June 30 (from 9:00am).

The lists of persons entitled to take part in the annual and extraordinary General Shareholders Meetings will be drawn up on the basis of the Gazprom Register of Shareholders as at the end of the business day on May 12, 2011.

The extraordinary Meeting is to be convened in compliance with the assignments by the Russian Federation President Dmitry Medvedev to replace government officials on boards of directors in open joint stock companies with independent or representative directors.

The Board of Directors approved the agenda of the extraordinary Shareholders Meeting and the wording of the Meeting notice. The issues related to early resignation of the Board of Directors Members and re-election of the Board of Directors to be held at the annual General Meeting were submitted for consideration at the extraordinary Meeting.

Gazprom chief vows to stick to 10-year natural gas agreement

Journal Staff Report

MOSCOW, April 18 – Alexei Miller, the CEO of Gazprom, said Monday that Ukraine will not be able to cancel the 10-year natural gas supply agreement that Kiev believes to be “extremely unfavorable.”

The possibility of challenging and cancelling the agreement in international courts had been disclosed on Friday by first deputy prosecutor general Renat Kuzmin.

“For the first time in history of relations with Ukraine a long-term contract base has been created,” Miller said, according to the Interfax report from Moscow. “The actins of implementing the contract cannot be questioned.”

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